Market Overview - U.S. stock markets have experienced a significant bull run since the start of 2023, with major indexes like the Dow, S&P 500, and Nasdaq Composite nearing all-time highs [1] - The S&P 500 and Nasdaq Composite have achieved multiple all-time highs in 2025, while the S&P 400 mid-cap index is up 4.9% year to date, just 4.6% away from its 52-week high [2][9] Mid-Cap Stocks - Investment in mid-cap stocks is recognized as a strong portfolio diversification strategy, combining attributes of both small and large-cap stocks [3] - Mid-cap stocks are less vulnerable to losses during economic downturns due to lower international exposure, and they can outperform small caps in a thriving economy due to established management and market presence [4] Recommended Mid-Cap Stocks - Five mid-cap stocks with favorable Zacks Rank for the remainder of 2025 are Dillard's Inc. (DDS), Sterling Infrastructure Inc. (STRL), StoneX Group Inc. (SNEX), Armstrong World Industries Inc. (AWI), and Watts Water Technologies Inc. (WTS), all rated Zacks Rank 1 (Strong Buy) [5][9] Company Insights Dillard's Inc. (DDS) - Dillard's is enhancing growth through strategic initiatives in both brick-and-mortar and e-commerce, focusing on customer acquisition and retention [8] - The company has a strong financial position with solid liquidity and minimal rent obligations, alongside shareholder-friendly practices like dividends and buybacks [10] - Expected revenue and earnings growth rates for DDS are -0.4% and -15.8%, respectively, for the current year, with a 1.8% improvement in the earnings consensus estimate over the last 30 days [11] Sterling Infrastructure Inc. (STRL) - Sterling Infrastructure provides e-infrastructure, transportation, and building solutions, operating through three segments: E-Infrastructure Solutions, Transportation Solutions, and Building Solutions [12][13][14] - The expected revenue and earnings growth rates for STRL are 6.5% and 56.9%, respectively, for the current year, with a 5.3% improvement in the earnings consensus estimate over the last seven days [15] StoneX Group Inc. (SNEX) - StoneX Group operates a global financial services network, offering execution, post-trade settlement, clearing, and custody services through various segments [16] - The expected revenue and earnings growth rates for SNEX are 4.9% and 21.7%, respectively, for the next year, with a 21.7% improvement in the earnings consensus estimate over the last 60 days [17] Armstrong World Industries Inc. (AWI) - Armstrong World Industries is a leading producer of ceiling systems for construction and renovation, operating in three segments: Mineral Fiber, Architectural Specialties, and Unallocated Corporate [18][19][20] - The expected revenue and earnings growth rates for AWI are 12.2% and 15.1%, respectively, for the current year, with a 0.7% improvement in the earnings consensus estimate over the last 30 days [21] Watts Water Technologies Inc. (WTS) - Watts Water Technologies designs and manufactures water safety and flow control products, reporting under three geographic segments: The Americas, Europe, and APMEA [22] - The expected revenue and earnings growth rates for WTS are 3.9% and 11.3%, respectively, for the current year, with a 0.8% improvement in the earnings consensus estimate over the last seven days [24]

Core Insights - Watts Water Technologies, Inc. (WTS) shares have increased by 40.8% over the past year, significantly outperforming its industry and broader market indices [1][7][22] - The company has achieved record sales, operating income, and earnings per share (EPS) in the second quarter, driven by organic sales growth of 6% due to favorable pricing and increased demand [4][22] Company Performance - WTS's stock closed at $276.9 as of August 29, 2025, trading below its 52-week high of $285.9 [2] - The company has outperformed peers such as Sensata Technologies, Badger Meter, and Thermon, which saw declines of 15.6%, 11.6%, and 15.6% respectively [2][7] - The adjusted operating margin expanded to 21.6%, supported by a strong balance sheet [4] Strategic Acquisitions - WTS has made several strategic acquisitions, including EasyWater, I-CON, Bradley, and Josam, to enhance its product portfolio and drive synergies [10][11] - The EasyWater acquisition is expected to contribute approximately $5 million in sales for 2025 and be EPS-neutral after purchase accounting [10] - The integration of these acquisitions is progressing ahead of expectations, enhancing the company's sales networks and cross-selling opportunities [11] Financial Health - The company reported operating cash flow of $361.1 million and free cash flow of $331.7 million in 2024, with $125 million in operating cash and $105.1 million in free cash flow generated in the first half of 2025 [12] - WTS has $137 million available under its buyback program, indicating strong cash flow management [12] Growth Drivers - The Nexa Intelligent Water Management platform is gaining traction as a key growth driver, providing insights for monitoring and efficiency in commercial buildings [13] - The company has raised its full-year sales growth outlook to between 2% and 5%, with organic sales expected to be flat to increase by 3% [14][16] Market Challenges - WTS faces ongoing softness in Europe, with expected sales declines of 6-9% in the third quarter and 5-9% for 2025 [17] - The company anticipates approximately $40 million in tariff impacts for 2025, which may create margin pressure [18] - Intense competition and potential tariff changes pose risks to market share and pricing strategies [19] Valuation - WTS shares are trading at a premium with a price/earnings ratio of 26.98 compared to the industry average of 18.66 [20][21]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1][2]. Company Analysis: Watts Water (WTS) - Watts Water currently holds a Momentum Style Score of A, indicating strong momentum characteristics [3]. - The company has a Zacks Rank of 1 (Strong Buy), suggesting a favorable outlook based on historical performance metrics [4]. - Over the past week, WTS shares increased by 1.24%, while the Zacks Instruments - Control industry rose by 2.52% [6]. - In a longer timeframe, WTS shares have appreciated by 11.86% over the past quarter and 49.62% over the last year, outperforming the S&P 500's gains of 10.57% and 21.94%, respectively [7]. - The average 20-day trading volume for WTS is 252,344 shares, which serves as a bullish indicator when combined with rising stock prices [8]. Earnings Outlook - In the last two months, four earnings estimates for WTS have been revised upwards, with no downward revisions, leading to an increase in the consensus estimate from $9.28 to $9.78 [10]. - For the next fiscal year, four estimates have also moved higher without any decreases, indicating positive sentiment regarding future earnings [10]. Conclusion - Considering the strong momentum indicators and positive earnings outlook, Watts Water is positioned as a 1 (Strong Buy) stock with a Momentum Score of A, making it a compelling investment option [12].

Core Insights - The performance of Watts Water's international operations is crucial for understanding its financial resilience and growth potential [1][2][3] Revenue Performance - The total revenue for Watts Water in the quarter ending June 2025 was $643.7 million, reflecting a 7.8% increase [4] - Europe generated $111 million in revenue, accounting for 17.2% of total revenue, which was a 2.78% surprise compared to the projected $108 million [5] - APMEA contributed $34.2 million, representing 5.3% of total revenue, slightly below the consensus estimate of $34.5 million, marking a -0.87% surprise [6] Future Projections - Analysts project total revenue of $577.38 million for the current fiscal quarter, indicating a 6.2% increase from the previous year, with Europe and APMEA expected to contribute 18.3% ($105.5 million) and 6.2% ($36 million) respectively [7] - For the full year, total revenue is projected to reach $2.35 billion, a 4.3% increase from last year, with Europe contributing 18.5% ($434.5 million) and APMEA 5.8% ($136 million) [8] Market Context - The reliance on international markets presents both opportunities and challenges for Watts Water, making it essential to track international revenue trends for future projections [9][10] - The company's stock has appreciated by 5.7% over the past four weeks, outperforming the Zacks S&P 500 composite, which increased by 2% [14]

Group 1: Tutor Perini Corporation (TPC) - Tutor Perini Corporation is a construction company with a Zacks Rank 1, and its current year earnings estimate has increased by 55.4% over the last 60 days [1] - The company's shares have gained 60.7% over the last three months, significantly outperforming the S&P 500's advance of 9.4% [1] - Tutor Perini possesses a Momentum Score of A [1] Group 2: Gilat Satellite Networks Ltd. (GILT) - Gilat Satellite Networks Ltd. is a satellite-based broadband communications company with a Zacks Rank 1, and its current year earnings estimate has increased by 78.8% over the last 60 days [2] - The company's shares have gained 33.2% over the last three months, also outperforming the S&P 500's advance of 9.4% [5] - Gilat Satellite possesses a Momentum Score of A [5] Group 3: Watts Water Technologies, Inc. (WTS) - Watts Water Technologies, Inc. is a leading manufacturer of water quality solutions with a Zacks Rank 1, and its current year earnings estimate has increased by 5.8% over the last 60 days [5] - The company's shares have gained 18.6% over the last six months, compared to the S&P 500's advance of 5.6% [9] - Watts Water possesses a Momentum Score of A [9]

Core Viewpoint - Watts Water Technologies, Inc. (WTS) reported strong financial performance in Q2 2025, with adjusted EPS of $3.09, surpassing the Zacks Consensus Estimate by 15.3% [1][8] Financial Performance - Quarterly net sales increased by 8% year over year to $644 million, exceeding the Zacks Consensus Estimate by 6.1% [2][8] - Organic sales rose by 6% year over year, driven by favorable pricing, volume, and pull-forward demand in the Americas [2][8] - Gross profit increased by 14% year over year to $325.9 million, while operating income rose by 21% to $135.3 million [9] Segment Results - **Americas**: Net sales increased by 11% to $499 million, with organic sales up 10%. Adjusted operating margin expanded by 290 basis points to 27.2% [5][8] - **Europe**: Net sales decreased by 3% to $111 million, with an 8% decline in organic sales. Adjusted operating margin improved by 170 basis points to 11.7% despite volume declines [6] - **APMEA**: Net sales decreased by 3% to $34 million, with a flat adjusted operating margin of 18.9% [7] Cash Flow and Liquidity - For the six months ended June 29, 2025, cash from operating activities was $125 million, down from $130.9 million in the prior year [10] - Free cash flow for the same period was $105.1 million, compared to $119.7 million a year ago, primarily due to higher working capital investments [11] - As of June 29, 2025, the company had $369.3 million in cash and cash equivalents and $197.3 million in long-term debt [12] Guidance - For 2025, the company expects reported sales growth between 2% and 5%, with organic sales expected to be flat to increase by 3% [13] - Adjusted EBITDA margin is forecasted to be between 20.7% and 21.3%, indicating an improvement of 60 to 120 basis points [14] - For Q3 2025, reported sales are expected to increase by 4% to 7%, with organic sales projected to rise by 2% to 5% [15] Market Performance - Shares of WTS have gained 42.3% over the past year, significantly outperforming the Zacks Instruments - Control industry, which grew by 7.9% [3]

Financial Data and Key Metrics Changes - The company reported record sales of $644 million for Q2 2025, an increase of 8% on a reported basis and 6% on an organic basis [15][9] - Adjusted operating margin reached 21.6%, up 280 basis points year-over-year, driven by favorable price cost dynamics and productivity improvements [17][10] - Adjusted earnings per share increased by 26% to $3.09, supported by operations, acquisitions, and reduced interest expenses [18][10] Business Line Data and Key Metrics Changes - Organic sales in the Americas increased by 10%, while reported sales rose by 11%, driven by price, volume, and pull forward demand [15][9] - Europe experienced an organic sales decline of 8% and reported sales down 3%, attributed to ongoing OEM and market weakness [16][10] - APMEA sales decreased by 1% on an organic basis and 3% on a reported basis, with growth in Australia and New Zealand offset by declines in China [16][10] Market Data and Key Metrics Changes - The Americas segment margin increased by 290 basis points to 27.2%, while Europe segment margins rose by 170 basis points to 11.7% [17][10] - The company expects organic sales growth of flat to up 3% for the full year, with reported sales growth anticipated to be up 2% to 5% [20][10] Company Strategy and Development Direction - The company is focusing on M&A, having acquired EasyWater, which is expected to contribute approximately $5 million in sales [11][10] - The rollout of the Nexa Intelligent Water Management solution is gaining traction, with successful installations in various sectors [12][10] - The company is committed to sustainability, having published its 2024 sustainability report highlighting progress in carbon emissions reduction and operational improvements [14][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain trade environment and expects to maintain a favorable price cost outcome despite tariff impacts [10][10] - The company is increasing its full-year sales and margin outlook due to strong first-half performance and expectations for the third quarter [13][10] - Management remains cautious about the European market, noting ongoing softness in general construction [49][10] Other Important Information - The company incurred $3.8 million in pre-tax acquisition costs and restructuring charges related to facility exits in Europe [18][10] - Free cash flow year-to-date was $105 million, down from $120 million last year, primarily due to working capital timing and increased CapEx [19][10] Q&A Session Summary Question: Impact of pull forward in sales - Management quantified the sales pull forward effect at approximately $20 million for the quarter [29][10] Question: Pricing dynamics and tariff impacts - Price realization was approximately 3% in the quarter, with expectations for mid-single digits in the second half due to implemented price increases [60][10] Question: Competitive positioning and domestic footprint - Management believes producing products in the countries they sell provides a strategic advantage, especially in the current uncertain market environment [44][10] Question: European market expectations - Management noted that destocking in the heat pump market is expected to end by Q3, but general construction remains soft in Europe [49][10] Question: Integration of acquisitions - All acquisitions are integrating well, with synergies being tracked and improvements noted across the board [66][10] Question: Nexa platform and sales cycle - The sales cycle for the Nexa platform is expected to shorten as more installations prove successful, enhancing customer understanding of the benefits [82][10]

Financial Data and Key Metrics Changes - The company reported record sales of $644 million for Q2 2025, an increase of 8% on a reported basis and 6% on an organic basis [15][16] - Adjusted EBITDA of $153 million increased by 22%, with an adjusted EBITDA margin of 23.8%, up 280 basis points [17] - Adjusted earnings per share rose by 26% to $3.09, driven by operations, acquisitions, foreign exchange, and reduced interest expense [18] Business Line Data and Key Metrics Changes - Organic sales in the Americas increased by 10%, while reported sales were up 11%, driven by price, volume, and pull forward demand [15][16] - Europe experienced an organic sales decline of 8% and reported sales down 3%, attributed to ongoing OEM and market weakness [16] - APMEA sales decreased by 1% on an organic basis and 3% on a reported basis, with growth in Australia, New Zealand, and the Middle East offset by declines in China [16] Market Data and Key Metrics Changes - The Americas segment margin increased by 290 basis points to 27.2% [17] - Europe segment margins increased by 170 basis points to 11.7% [17] - APMEA segment margin remained flat at 18.9% compared to the prior year [17] Company Strategy and Development Direction - The company is focusing on M&A, having acquired EasyWater, which is expected to contribute approximately $5 million in sales and be neutral to adjusted EPS in 2025 [11] - The rollout of the Nexa Intelligent Water Management solution is gaining traction, with successful installations in various sectors [12] - The company is committed to sustainability, having published its 2024 sustainability report highlighting progress in safety, energy efficiency, and water conservation [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current trade environment and increasing full-year sales and margin outlook due to strong first-half performance [25][26] - There is caution regarding the European market, with ongoing softness in general construction and uncertainty around order rates [49] - The company expects continued strength in data centers, which is offsetting residential market softness [94] Other Important Information - The company estimates a direct tariff impact of approximately $40 million for 2025, down from a previous estimate of $60 million [21][56] - Free cash flow year-to-date through Q2 was $105 million, with expectations for sequential improvement [19] Q&A Session Summary Question: Impact of pull forward in sales - Approximately $20 million of sales pull forward was realized in the quarter [28] Question: Pricing dynamics and tariff impacts - Price realization was approximately 3% in Q2, with expectations for mid-single digits in the second half [57] Question: Competitive positioning and domestic manufacturing - The company believes its domestic manufacturing strategy provides a competitive advantage in the current uncertain market environment [43] Question: Update on European heat pump market - Destocking in the heat pump market is expected to end by Q3, but general construction remains soft in Europe [49] Question: Changes in tariff estimates - The reduction from $60 million to $40 million in direct costs is due to changes in tariffs, including new copper tariffs [56] Question: Integration of acquisitions - All acquisitions are integrating well, with synergies being realized across the board [61] Question: Future of Nexa platform - The company expects the sales cycle for Nexa to shorten as more customers realize its benefits [77]

Q2 2025 Performance - Record sales, operating income, and EPS were achieved in Q2 2025[5] - Organic sales increased by 6% due to favorable pricing, pull-forward demand, and incremental volume[5] - The adjusted operating margin reached a record of 21.6%, representing an expansion of 280 bps[5] - Adjusted EBITDA was $153 million, a 22% increase[13] - Adjusted EPS increased by 26% to $3.09[14] Segment Performance - Americas experienced a 10% increase in organic sales, with acquisitions adding $7 million[18] - Europe saw an 8% decrease in organic sales, but benefited from a $6 million FX benefit[18] - APMEA experienced a 1% decrease in organic sales due to project timing in China[18] Financial Position - Free cash flow was $105 million, a 12% decrease compared to the previous year[15] - The net debt to capitalization ratio was negative 10%[18] - Net leverage was negative 0.4x[18] 2025 Outlook - The full-year reported sales growth outlook was raised to between +2% and +5%[19] - The full-year organic sales growth outlook was raised to between flat and +3%[19] - The full-year adjusted EBITDA margin outlook was raised to between 20.7% and 21.3%[19]

Core Insights - Watts Water reported revenue of $643.7 million for the quarter ended June 2025, reflecting a year-over-year increase of 7.8% and a surprise of +6.1% over the Zacks Consensus Estimate of $606.7 million [1] - The company's EPS for the quarter was $3.09, up from $2.46 in the same quarter last year, resulting in an EPS surprise of +15.3% compared to the consensus estimate of $2.68 [1] Financial Performance - The revenue from the Americas segment was $498.5 million, exceeding the average estimate of $472 million by two analysts, marking an 11.3% year-over-year increase [4] - The APMEA segment reported revenue of $34.2 million, slightly below the average estimate of $34.5 million, representing a year-over-year decline of 2.6% [4] - Revenue from Europe was $111 million, surpassing the estimated $108 million, but showed a year-over-year decrease of 2.7% [4] Market Performance - Shares of Watts Water have returned +3.6% over the past month, outperforming the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]